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Faced with competition from a bevy of new mixed-use centers targeting luxury shoppers, Indianapolis-based Simon Property Group (NYSE: SPG) is revamping the Galleria.

Cleveland-based KA Architecture Inc. designed plans that include a new 198,000-square-foot Saks Fifth Avenue store, a high-rise residential tower and the addition of a multitenant building for high-end luxury boutiques.

The existing Saks will be converted into a two-level wing that will house up to 35 luxury retailers and restaurants. Saks will open in its new location as a two-story department store, where the Macy’s on Sage is currently, in fall 2015. Until then, Saks will continue to operate in its existing store.

Macy’s will consolidate into its Hidalgo Galleria store. The retailer has operated two stores in the Galleria since its 2005 acquisition of the Foley’s chain, which had a lease in the mall, as well.

Simon’s plans also include upgrades to the interior, exterior and parking decks of the mall. The overall plan will eventually add 100,000 square feet of new retail space to the Galleria.

The investor:

Simon Property Group Inc. recorded $4.8 billion in revenue in 2012 and is led by CEO and Chairman David Simon. The real estate firm, which was founded in 1993, has 93 full and part time employees in Houston.

The mall:

The Galleria, the nation’s fourth-largest shopping center, is jointly owned by an affiliate of SPG and Illinois-based Institutional Mall Investors LLC. The Galleria covers 2.2 million square feet and includes about 400 stores and restaurants, two hotels and three office towers. Other upgrades to the Galleria, such as LED lighting in the parking garages and new directional signs, are underway.

The back story:

Since its opening in 1970, the Galleria mall has been seen by many luxury retailers as the best venue to showcase their products in the Bayou City.

However, within the last several years, the development tide has changed — bringing more leasing options and different avenues to reach clientele for these high-end stores.

Within the first seven months of this year, several mixed-use projects have bagged luxury retail leases. Some of the retailers are expansions into new parts of Houston for them, while others are completely new to the city.

“We are seeing an influx of retailers that we haven’t seen before in Houston because the city is emerging as a presence on the global stage,” said Nick Hernandez, managing director of the retail services group at Houston-based Transwestern. “They’ve heard of the strength of the economy and spending power here. Houston’s image is evolving.”

And when retailers set their sights on Houston, many are now more focused on mixed-use environments due to the steady stream of potential customers, he said.

The competition: Blvd Place, CityCentre, the Woodlands, Gateway at Memorial City and the River Oaks District

Emily Wilkinson leads the weekly edition of the Houston Business Journal, including special publications, centerpiece stories, Focus sections and the Deal of the Week. Follow her on Twitter for more.

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